He also gave the clearest sign yet that he will lead the "in" campaign, stressing that membership of the reformed EU would be best for the UK's economy and security.

Speaking at the end of a two-day Brussels summit at which he faced strong resistance from EU counterparts to his plans for changes to welfare rules for migrants, Mr Cameron insisted "good progress" had been made towards an agreement in February.

He has promised to hold the public vote before the end of 2017. But a deal at the next European Council summit in February would clear the way for the referendum to be held much earlier, with speculation that his preferred date is June 16 - before a summer in which Europe's migration crisis could hit new heights.

"We've made good progress, we are a step closer to agreement on the significant and far-reaching reforms I have proposed," he said.

"It is going to be tough and there is a lot of hard work to do.

"But I believe 2016 will be the year we achieve something really vital, fundamentally changing the UK's relationship with the EU and finally addressing the concerns of the British people about our membership.

"Then it will be for the British people to decide whether we remain or leave. It is a choice we will all need to think hard about.

"I believe if we can get these reforms right - and I believe that we can - I firmly believe that for our economic security and increasingly for our national security, the best future for Britain is in a reformed European Union."

Mr Cameron added: "We are well on the way to a deal, we have taken some good steps forward. Now we have got to bring it home."

However, the exact shape of the agreement remains unclear after the summit, with the issue of welfare curbs on migrants proving particularly tricky.

Many of the 27 other EU leaders have roundly dismissed Mr Cameron's proposal of a four-year ban on migrants claiming in-work benefits, arguing it is discriminatory and against the core principle of freedom of movement.

Mr Cameron has said the idea is still "on the table" and no alternatives have yet been formally mooted - although he has stressed he is ready to consider other options that would reduce "pull factors" for incomers.

Mr Cameron said: "The British people, and I totally share this view, feel that in recent years the pressure of new arrivals has just been too great, and part of that pressure is caused by the fact that we have a very generous top-up welfare system which means sometimes you can train as a nurse or a doctor in some less well-off European countries and, having finished your training, it actually pays you to work in an unskilled job in the UK rather than continue as a nurse or a doctor in your own country.

"That doesn't make sense for either side in the European Union and there was a lot of recognition of that."

Asked about the timing of the referendum, the Prime Minister made clear he was leaving scope to push it back if negotiations stalled.

"What matters is that these changes are legally binding and irreversible, and I believe we can find ways of setting that out, demonstrating that, in the coming months.

"Obviously I want a deal in February but I have set a deadline for the referendum as the end of 2017, I always wanted to give myself time to get this right. What matters is the substance in getting it right rather than the timing."

Polish prime minister Beata Szydło reiterated that she was still not prepared to accept the UK's welfare proposal, which would need unanimous approval from all 28 states.

"We do understand that it is a complex situation and the fact that the citizens of Great Britain would like to get a proposal from the EU," she told a separate press conference.

"However what is most difficult to accept by all of us, and I think it was stressed in every statement, is that free movement of persons and welfare benefits.

"My position and the position of Poland on this one is clear. It is not ambiguous. Those proposals that have been presented now by Prime Minister Cameron limiting those possibilities are not acceptable to Poland.

"We are open to discussion and compromise. But today many well-educated Polish people live in the UK and work there and are building the GDP of Great Britain.

"Let us look for a compromise - we have until the next summit and we are waiting for proposals from Great Britain."

Matthew Elliott, chief executive of Vote Leave, said: "David Cameron has already dropped nine out of 10 of his demands, and is no longer pushing for the 'fundamental change' he used to say we need.

"His renegotiation has boiled down to a trivial set of demands, which will do nothing to take back control or to address the inherent risk of remaining in the EU - no matter when the referendum is held.

"The only way to take back control is to Vote Leave."

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